The Queen St rental property was well ablaze when University of Otago physiotherapy students Ramakrishnan Mani and Divya Adhia were woken by a smoke alarm shortly before 6am yesterday.
"We heard the siren alarm go off and went outside and the whole side of the building was on fire.
"We rang the fire department and then we got buckets and started pouring water on it," Mr Mani said at the scene.
Firefighters praised the actions of the couple.
"They did everything right. They had a working smoke alarm, which alerted them to the fire, and they contacted us straight away," Willowbank Senior Station Officer Craig Geddes said yesterday.
"The fire had reached the eaves when we got there and if it had really taken hold we would probably have been dealing with fatalities.
"It had blocked off the only means of escape, through the porchway. That's why it was so serious." The property contains four flats housing up to 14 people, although it is unknown how many people were in the building at the time of the fire.
"The smoke alarm on this occasion has definitely saved lives and the interaction by the occupants has undoubtedly helped slow the progress of the fire." The blaze appeared to have started in a porch, which was covered with shade cloth.
"The fire obviously looks suspicious and we have had a few of these around here lately," Mr Geddes said.
"We've had a spate of rubbish fires around the area over the last couple of weekends. There's been a bit of it going on, which is a real concern."
Southern Region fire safety officer Stuart Ide travelled from Queenstown yesterday morning to investigate the cause of the fire.
Police were also investigating the fire yesterday.
"I don't believe it was a random, off-the-street event.
"But, we also don't think anyone was being deliberately targeted," Detective Sergeant Brett Roberts, of Dunedin CIB, said.
"It appears there may have been some people at the address earlier and we'd like to talk to anyone who was out and about between 5.30am and 6am and may have noticed something," he said.
The fire was attended by units from Dunedin Central and Willowbank.